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Activist investor Elliott Management targets PayPal

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Yahoo Finance Live’s Brian Sozzi breaks down why activist investor Elliott Management is targeting PayPal.

Video Transcript

[MUSIC PLAYING]

- Activist investor Elliott Management has taken a stake in PayPal, according to "The Wall Street Journal." The size of the stake and Elliott's intentions undisclosed, but Brian Sozzi has done a deep dive on this one. Sozzi, got to get your take on this one.

BRIAN SOZZI: Yeah, fascinating. I should say off the jump, Elliott declined to comment to Yahoo Finance on this report by the "Journal," but I am hearing some chatter that this stake has, in fact, happened. PayPal did not return our request for comment. Let me set this up and why I find it so interesting.

So on July 14, you saw Elliott-- and there's a nice little nifty timeline RT put up there. Elliott took a stake in Pinterest on July 14. Pinterest shares popped, went up through the roof, 15%. July 26, of course, as we're talking about now, you saw Elliott reportedly take that stake in PayPal, PayPal shares on the move.

Now go back further, October 20 of last year, PayPal was speculated to be buying Pinterest or have interest in buying Pinterest. Now October 25, PayPal-- PayPal came out and said, no, we're not exploring a bid on Pinterest. So those rumors died down.

Now here, let's look at what Elliott might be trying to do here, one of the most noted and-- just really noted activist firm on Wall Street-- they might be pushing with positions in Pinterest and PayPal. They may want to get both of those teams to the table and start to get a deal talk together. It would make a lot of sense. PayPal, of course, a leader in payments, and then you have Pinterest that need some form of commerce and payments platform to take its platform to the next level.

Next, if they don't want to get that deal happen, you could see Elliott push PayPal to spend more of its cash. PayPal's in a very strong cash position, perhaps they should be doing more to buy back their stock, get that stock moving in the right direction. It has not been in the right direction the past year, down about 75%. Or lastly, get PayPal to pull back on some of its spending, like many other players are doing right now in the tech industry. PayPal is really not giving that indication to Wall Street that it wants to pull back on spending. It probably should.

And then lastly, why I'm really intrigued by here, of just the people that are involved in this potential whole tie up. You can see Dan Schulman right there on the screen. He's been the CEO of PayPal since 2014, one of the most well-regarded CEOs in corporate America, but it's been a challenge for him the past year. You've seen PayPal shares down about 75%. You have seen profits slow at the company. But still Schulman, one of the top CEOs in corporate America.

Next, hang with me, folks, we have Bill Ready. He is the new CEO of Pinterest. He took over officially on June 29. He spent six years working at PayPal and worked alongside Dan Schulman extensively. And in many cases, many viewed Bill Ready as the successor to PayPal CEO Dan Schulman. So lots of intrigue all right-- all right there.

And last but not least, I'll toss this one in here, that is PayPal chairman John Donahoe. He's the current CEO of Nike. Interesting, he was the CEO of eBay from 2008 to 2015. EBay was attacked by Elliott in 2019.

So you have an Elliott team-- of course, that is after John Donahoe left that job at eBay. But still, Elliott, you would have to imagine, is very familiar with the work that John Donahoe did and perhaps didn't do at eBay. Now, Elliott ultimately got a successful spin-off of the StubHub business and the classified business for eBay over in 2019.

Overall, here's my take. I do think you'll probably see speculation start to increase about a deal between Pinterest and PayPal. It makes a lot of sense. Now, this is not going to come overnight. A deal of this size and logistical challenges would take a while. But still, you see Elliott, I think, positioning for trying to get something done here.

- There's a lot of synergy that could take place here, I think, from end to end. And you laid it out extremely well. The only thing I'll add here is that for Pinterest and some of the ability for them not just to continue to see increased time spent on the platform, it's going out to advertisers in an environment like this and getting them to spend more on the platform in this interim period of time while you're waiting for more of that monetizable active usership to really permeate throughout the experience within that platform of Pinterest that doesn't want to be called a social media company.

BRIAN SOZZI: You have to make money. You can't just sit on Pinterest nowadays and look up recipes. They have to make money.

- They got some good recipes.